The two most popular types of Forex Trading System today are the technical and fundamental types. Most traders prefer one or the other, while there are a few who have no problem using both when determining strategies. These two methods have been proven to help traders earn big in foreign exchange. However, each type also comes with their own drawbacks which users should learn to watch out for.
Technical Forex Trading System
As the name suggests, this particular trading system focuses mostly on technical information such as accumulating numerical data and charting. A good example of this would be traders requiring that the ADX level be above forty before recognizing a strong currency trend. At which point, traders could decide to make their move in the market in the hopes of gaining profit. In most cases, the technical trading system utilizes two different technical indicators to arrive at conclusion. For example, there are those who only make market movements if the ADC and the Bollinger Band readings reach a specific level. Some of the trader types using this method include the range and trend traders.
Fundamental Forex Trading System
Although the fundamental technique also utilizes numerical data, it derives from a completely different source. Specifically, fundamental techniques rely heavily on the economic reports of a trade. These economic reports would predict how strong or weak the currency of a specific country would be in the future. Although fairly accurate, there is no combination of reports during this time. The use of charts is also not common.
Technical versus Fundamental – Pros and Cons
As mentioned, both techniques come with their own pros and cons. The main attraction for the technical method is the fact that it is highly reliable. The combination of two technical factors significantly decreases the risk for the trader. The system itself is also easy to do even for beginners, which is why the technique is a favorite for new traders. Using this technique also presents traders with a very flexible strategy thanks to the abundance of available data. The only problem with the technical approach is that it doesn’t take into account unexpected events. For example, natural disasters may suddenly wreak havoc in a country, effectively putting their currency in a weak spot.
The great thing about the fundamental approach is that it doesn’t necessitate consolidating multiple data in order to achieve results. The only problem with this parameter is the fact that economic results are often unpredictable to the point where they go beyond the expectations of experts. When this happens, the parameters go off tangent which would eventually lead to losses.
Currently, there is also a new Forex Trading System called Intermarket approach. However, this one is still in the development phases and still not considered by the experts. Note that the trading system a person adapts must work well within their trading style. For beginners, this means exploring the market as much as possible and perhaps going through hits-and-misses before ultimately developing their own strategies.